The euro-dollar pair continued to test the support level of 1.1580, which corresponds to the midline of the Bollinger Bands indicator on the daily chart. Despite numerous attempts made this week, sellers of EUR/USD have not managed to overcome this price barrier, let alone establish themselves below it. Although bearish sentiment clearly dominates the pair, buyers, if they do counterattack, are limited to a 20-30-pip correction. EUR/USD traders (both buyers and sellers) are clearly being cautious ahead of the key release of the week.
Thursday, on November 20, the United States will publish the long-awaited macroeconomic report. We will find out the official labor market data for September. The report is published with a significant delay, as it was originally scheduled for October 3. However, two days before that, the U.S. experienced a shutdown, which lasted a record 43 days. Therefore, we will only learn the September figures on Thursday.
This report is indeed highly anticipated, as the Federal Reserve is effectively divided into two camps: one advocating a wait-and-see stance due to concerns about rising inflation risks, while the other calls for a rate cut in December, citing a deteriorating labor market.
At the same time, "moderately hawkish" signals have been sounding increasingly frequently and loudly, leading most traders to revise their forecasts. According to the CME FedWatch tool data, the probability of a rate cut at the December meeting now stands at 48%, whereas just a month ago, the market was almost certain that the central bank would take further steps toward easing monetary policy by the end of the year (with a probability estimated at 90-95%).
Considering this "preview," Non-Farms takes on particular significance. If the report turns out weaker (sufficiently weak) than forecasts, the balance will tilt back in favor of the "dovish" scenario. This means the likelihood of a rate cut will rise to 60-70%, putting the dollar under pressure once again. However, if the report is at least at the forecast level (not to mention in the green zone), the greenback will enjoy increased demand amid easing "dovish" expectations.
Even before the shutdown, most analysts said U.S. unemployment in September would likely remain at August's level of 4.3%. Experts also predicted a weak increase in non-farm payrolls, only by 50,000 (following a 22,000 rise in August). The growth rate of average hourly earnings is expected to remain at last month's level, i.e., at 3.7%.
It should be noted that traders are "prepared" for a weak Non-Farms report, as unofficial reports have signaled negative trends. The ADP report, which was in the "red zone," is a notable example. The figure dropped into negative territory for the first time in four years, reflecting the ongoing slowdown in the American labor market. According to ADP specialists, the number of people employed in the private sector decreased by 29,000 in September (the lowest since December 2020), while most analysts predicted a weak, but still positive growth of 50,000.
Meanwhile, reports from the recruiting firm Challenger, Gray & Christmas also indicate that U.S. companies continued to cut jobs in September and October. The most vulnerable categories include warehouse workers, employees in technical sectors, and the food industry.
Such negative signals (from ADP and Challenger reports) have allowed us to assume that the Non-Farms for September and (especially) October will reflect the negative situation in the American labor market. The October report will likely not be published due to the shutdown, so all market attention will be on the September figures. Following the release, the EUR/USD pair will either drop to the 15-figure bottom and then to the support level of 1.1480 (the lower line of the Bollinger Bands on D1), or it will return to the 16-figure area, testing the resistance level of 1.1650 (the lower boundary of the Kumo cloud on the same timeframe).
Another release of interest is the Unemployment Claims report. Although this is a secondary indicator, it is a more timely measure of the American labor market's health. Alongside other official reports, the BLS has stopped publishing weekly Unemployment Claims reports, which has also sparked intrigue in this area.
In other words, the U.S. labor market, after Thursday's information, will either become an ally of the greenback or a heavy anchor. In the lead-up to such significant releases for the EUR/USD pair, it is advisable to maintain a wait-and-see stance, despite Wednesday's prevailing bearish sentiment. Firstly, Non-Farms have the potential to "repaint" the fundamental picture for the greenback. Secondly, sellers of EUR/USD still cannot overcome the 1.1580 support level and consolidate below it. All of this indicates indecision among traders, both buyers and sellers.
